Supreme Court Justices Worry About 'Parade Of Horribles' If They Agree You Don't Own What You Bought

from the can't-resell-that-toyota dept

As we were discussing, on Monday, the Supreme Court heard the oral arguments in the Wiley v. Kirtsaeng case over whether or not you have the right to resell (or even display) a product you bought that was made outside of the country, which contains content covered by copyright. First off, a big caveat that needs to be mentioned every single time we write about oral arguments in a court case: it is not uncommon for what is discussed, and the questions asked, to really have almost nothing to do with the final decision. Everyone loves to read the tea leaves based on the questions the Justices ask, but, quite often, the questions (and answers) don't necessarily have much bearing on the final decision. The written briefs usually have a much bigger impact. That said, it doesn't mean the questions are meaningless, or that we can't learn a little bit from them.

It shouldn't be much of a surprise that the Justices were pretty pointed in their questions (pdf) for all three presenters (Wiley gave some of its time to the US government, who actually argued for a "middle ground" interpretation between the positions of both Wiley and Kirtsaeng). Justice Ginsburg, who in my opinion tends to get awfully confused when it comes to copyright cases, definitely led the attack on the lawyer representing Kirtsaeng, Joshua Rosenkranz, though he appeared to handle himself well. Still, there were clear concerns by Ginsburg and some of the other Justices over how far Kirtsaeng's interpretation of copyright law might go. The key issue there was the definition of "lawfully made under this title." If you haven't followed the case closely, that line is a key part of the first sale doctrine -- with Wiley (and various copyright holders) arguing it means that the first sale doctrine only applies to works made in the US, but not to those made elsewhere and imported. Kirtsaeng argues, instead, that the important part is "lawfully made" -- such that works, that are legally made elsewhere and which fit under the general characteristics of US copyright law, get first sale doctrine support when imported into the country. That is infringing copies (the Justices refer to "piratical" copies) wouldn't get such rights, but "lawfully made" products would.

What really comes up is that, depending on how you read it, there could be a significant conflict between two parts of copyright law: Section 109, which discusses first sale rights and Section 602, which talks about importation of copyright covered works. The argument is what to do when those two collide. Kirtsaeng argues that 109 is the key, and when it comes to first sale, we allow it. Wiley argues that 602 is more important since Congress wanted to allow for market segmentation and stop gray markets. The government advocated for a bizarre middle ground based on effectively ignoring the actual language of 109 and going all the way back to a century old ruling, from which the language in 109 eventually came (sort of).

The reality appears to be that Congress really did not think much about the possibility of this issue being a problem. In the one case where the possibility of a conflict was discussed, the discussion was that thought needed to be put into how to deal with it... but none really was. And that brings us to the arguments by Wiley's lawyer, former Solicitor General Ted Olson (a favorite lawyer for copyright maximalists). The Justices hit him pretty hard on a number of points, focusing mainly on a "parade of horribles" that might occur should his interpretation be accepted by the Court, and Olson seemed woefully unprepared to deal with these questions. Seriously, Wiley should be pretty upset by Olson's handling of the case here. The Justices kept bringing up examples, and Olson hit back weakly with "well, perhaps fair use fixes that" as an argument for why some absolutely ridiculous scenario might not apply should he win. This happened over and over again. There's a discussion on giving a book bought overseas to family members, and then a bunch of other examples. In one key exchange, Justice Breyer pointed out that under Wiley's interpretation, people wouldn't be able to resell their own Toyotas, since they have software covered by copyright:

JUSTICE
BREYER: Imagine Toyota, all right? Millions sold in the United States. They have copyrighted sound systems. They have copyrighted GPS systems. When people buy them in America, they think they're going to be able to resell them.
Now, under your reading -- now, this is one of their horribles, I gather, and I want to know your answer to it. Under their reading, the millions of Americans who buy Toyotas could not resell them without getting the permission of the copyright holder of every
item in that car which is copyrighted?

MR. OLSON: There may be -

JUSTICE
BREYER: Is that right?

MR. OLSON: There may be just -

JUSTICE
BREYER: Am I right or am I wrong? Am I off base or am I wrong -- am I right?

MR. OLSON: There are other defenses, but that is not this case. This case is not

-JUSTICE
BREYER: Well, how do you distinguish? How do you distinguish?

MR. OLSON: The government -- the government would argue for a broader interpretation under what was made under this statute, whether that would include the importation or the distribution in commerce. That's an argument that the government makes, but it's not necessary to decide this case.

JUSTICE BREYER: Now, explain to me, because they're horribles if I summarize them, millions and millions of dollars' worth of items with copyrighted indications of some kind in them that we import every year; libraries with three hundred million books bought from foreign publishers that they might sell, resale, or use; museums that buy Picassos that now, under our last case, receive American protection as soon as that Picasso comes to the United States, and they can't display it without getting permission from the five heirs who are disputing ownership of the Picasso copyrights.

Those are some of the horribles that they sketch. And if I am looking for the bear in the mouse hole, I look at those horribles, and there I see that bear.

So I'm asking you to spend some time telling me why I'm wrong.

MR. OLSON: Well, I'm -- first of all, I would say that when we talk about all the horribles that might apply in cases other than this -- museums, used Toyotas, books and luggage, and that sort of thing -we're not talking about this case. And what we are talking about is the language used by the statute that does apply to this case. And that -

JUSTICE
BREYER: But we need -

JUSTICE
SOTOMAYOR: Don't those horribles -

JUSTICE
BREYER: -- interpretation -

JUSTICE
KENNEDY: But you have to look at those hypotheticals in order to decide this case.

MR. OLSON: Well, and that's -

JUSTICE
KENNEDY: You're aware of the fact that if we write an opinion with the -- with the rule
that you propose, that we should, as a matter of common sense, ask about the consequences of that rule. And that's what we are asking.

That feels like the key exchange here, because the Justices recognize that Wiley's interpretation can lead to some really crazy results. Olson's repeated attempts to argue that such concerns are overblown because we haven't seen that "parade of horribles" yet doesn't seem to have convinced the justices. Later in the conversation, Justice Breyer explained that there's a plausible explanation for not seeing the "parade of horribles:" the fact that companies haven't yet seen a bright line from the Supreme Court that allowed them to commence said "parade of horribles:"

JUSTICE
BREYER: The main point is that horribles haven't occurred. Right?

MR. OLSON: The main -- main -

JUSTICE
BREYER: Sometimes horribles don't occur because no one can believe it.

Now, for example, I believe there is going to be a storm, but it hasn't started yet.

So I would like to know -- I would like to know, if you were the lawyer for the Toyota distributor, and if you were the lawyer for the Metropolitan Museum of Art, or you are the lawyer for a university library, and your client comes to you and says, my God, I just read the Supreme Court opinion. It says that we can't start selling these old books or -- or lending them or putting them in our word processor or reselling the Toyota without the -- without looking -- displaying the Picasso without the permission of the copyright holder, who may or may not be Toyota itself.

What, as their lawyer, do you tell them? Do you tell them, hey, no problem; or, do you tell them, you might become a law violator; or, do you tell them, I better litigate this? What do you tell them?

Olson responded that each scenario has different sets of facts, and then went back to his "well, there's fair use" routine, which Chief Justice Roberts finally called him on, asking Olson to expand on what else there is besides fair use, and wondering if it makes sense for all of these kinds of situations (i.e., displaying a Picasso or reselling your Toyota should rely on fair use law). Olson stammered around for a bit before trying out "implied license" also, which doesn't seem like a very strong answer. And, from there, much of the Justices' concern appeared to be that Wiley/Olson's reading of the law just doesn't make much rational sense. As per the clash between sections 109 and 602, Justice Sotomayor pointed out that since it seems obvious there's a conflict, shouldn't the court look for what makes the most sense, rather than come out with an obviously ridiculous ruling and leave Congress to fix it?

Isn't it incumbent upon us to give the statute what is plainly a more rational plain meaning than to try to give it a meaning and then fix it because we understand that the meaning doesn't make sense?

Justice Kagan also pointed out that Olson keeps going back to Section 602 (about importation of copyrighted goods) as the crux of his argument, but that's actually not the part of the law up for discussion. The whole point of the case is the interpretation of Section 109, and Justice Kagan pointed out that Wiley/Olson's interpretation there leaves much to be desired:

I mean, I -- you spend a lot of time talking about the legislative history and the purposes behind 602. But the language that we're supposed to be interpreting is the language in section 109. And the language in section 109, as far as I can see, there's really nothing to support your argument that that language was intended to address this gray market problem.

Olson hit back by saying that 109 and 602 were passed together in the same law (1976 Copyright Act), but that ignores the fact that most of 109 is actually just a holdover from the 1909 Act, and thus it's not like the two pieces were written together. And, as noted earlier, there was at least some awareness that the two might conflict and something should be done to clarify that.

One final interesting tidbit. Wiley gave some of its time over to the US government, whose brief in the case tried to chart out this "middle ground" between the two sides. Wiley must have felt that the government's argument would favor it in the end, since it gave over its time to the US government, but when the US's lawyer, Malcolm Stewart, was asked point blank which would be worse, he was finally pushed into a corner and admitted that things would probably be worse if Wiley got its way.

Once again, you shouldn't read too much into what's said at the oral arguments, as the final decisions often turn on very different issues, but at least there is some clear skepticism of Wiley's argument that you can't possibly really own anything purchased overseas.

Re: Not difficult: copyright is the right to control copies.

You're right - Supreme Court Justices are all stupid to be asking these kinds of questions. I mean, who do they think they are, questioning whether someone might use this ruling to restrict the sale of goods in the future?

Re: Not difficult: copyright is the right to control copies.

My God, you're a terrible troll. If you're too stupid to understand that just because there's no evidence of real harm as things stand now, doesn't mean that once a decision comes out that changes how things work there will be harm, then I'm surprised you can figure out how to get dressed each day.

Re: Not difficult: copyright is the right to control copies.

Are you that efffing dense?

The reason horrible outcomes haven't happened yet is because there is no clear view of the law.

If the supreme court says first sale rights are gone for imported goods you will get to watch companies line up their lawyers and file their cases to take our right to resell _everything_ away from us.

Imagine how happy the car companies could be if they could completely shut down the used car markets. Now everyone will always need to buy a new car....

If Wiley wins this case our economy is screwed. One only needs to look as far as the mess we have with patents to realize that this could get really really bad.

Re: Re: Not difficult: copyright is the right to control copies.

The thing I'm struggling to understand is how one part of copyright law can apply to a work and another doesn't. Is that what was intended? Shouldn't it be both or neither? If imported works don't have right of first sale then perhaps they shouldn't be covered by any copyright.

Re: Re: Re: Not difficult: copyright is the right to control copies.

"The thing I'm struggling to understand is how one part of copyright law can apply to a work and another doesn't. Is that what was intended? Shouldn't it be both or neither? If imported works don't have right of first sale then perhaps they shouldn't be covered by any copyright."

I'm wondering if Wiley believes imported works are copyrighted at all in this country.

You can have a lack of a right to resell without reselling being illegal. That's two separate arguments ... isn't it? I'm confused.

Re: Re: Not difficult: copyright is the right to control copies.

Disposal (junking) is a transfer of ownership; we established that in the Universal Music case on promo CDs. If the extreme view of Wiley holds, you could never get rid of a car. (What about upon your death? Well, we already see the discussion that digital goods terminate upon death, so...)

Re: Not difficult: copyright is the right to control copies.

The Supremem court is clearly claiming in this quote: "You're aware of the fact that if we write an opinion with the -- with the rule that you propose, that we should, as a matter of common sense, ask about the consequences of that rule. And that's what we are asking." The SCOTUS is suggesting that once the ruling occurs, once its codified, where is the line drawn? It appears Wiley's line is profit motive, which kills a large portion of the amazon and ebay market. The lawyer also argues that its fair use, but as we've discussed before Profit Motive does not deny fair use claims.

I am surprised that you, OOTB, are arguing for Corporate interest. I thought corporations were the root of all evil?

Also, the "no evidence of real harm"? You are taking that out of context and applying it in the wrong direction. That test applies to Copyright holders arguing that the market is harmed by piracy. The arguement goes to show that the statement by rightsholders is demonstratibly false.

Does not apply to whether or not this action is legal. Evidence of market harm has already been shown. The textbook market has been depressed, causing 'harm'. The question is whether that 'harm' was done legally, and is therefore is actually competitive practices rather then actual harm, or is illegal and therefore actual harm. Techdirt, Kirtsaeng, and I all agree that this is the result of competition in an overly inflated market.

Re: Not difficult: copyright is the right to control copies.

Had you confined your post to the first two paragraphs, it would've been fine. But you had to go an throw in a condescending "Mike" and not one but two ad hominem fallacies. If you control your urge to belittle, you may actually be taken seriously one day.

I am truly surprised on how the judges seem to be well aware of the implications of such a landmark ruling can have. I can see light in the end of the litigation tunnel here and I now expect a sane result (albeit with reservations).

It's the same as always with the MAFIAA (copyright industry in general mind you). They can't support their assumptions with facts so they resort to bogus statistics, lies and when they don't stick they just stutter. Typical.

Re:

I am truly surprised on how the judges seem to be well aware of the implications of such a landmark ruling can have. I can see light in the end of the litigation tunnel here and I now expect a sane result (albeit with reservations).

That hasn't stopped them in the past from making terrible decisions. They've made terrible rulings recently where they acknowledge the detrimental nature of their decision, but say that they have to because that's what the law says. Like the ruling about corporations being people.

I can see that happening here as well. I think they may do it just to sort of force Congress to address the issue. Which is what I hope they were doing in the Citizens United case.

Re:

I enjoy the fact that the applicable law, as viewed by Kirtsaeng's council, agrees with the viewpoint I argued at length in the last article. That its not because "US copyright doesn't apply so I get free reign", its because if the "...making was lawful, which is to say was it authorized,..." by the Source of the copyright. The key moderate argument which can get this passed.

everyone is supposed to hand over hard earned cash for various objects, which have always been looked at as having been bought and therefore owned by the purchaser or who the purchaser gave the item to, ie, as a birthday or Xmas present for example. now, we are supposed to do exactly the same but only to find out that we haven't actually bought anything other than either a license to use the item etc or the right to use the item etc. this is going to get even worse with the onset of cloud services because whatever is put into the cloud, will not be downloadable and not be accessible unless there is an available internet connection, which obviously has to be paid for as well. what this means is that whatever it is that's purchased is only temporary, it can be taken away at any time for amy reason and cannot be passed on for remuneration by the original purchaser and without getting permission from the originator and handing over more money. that means that the same item will be bought and paid for by more than one person only if the originator allows it and is paid multiple times for each item. how the hell would we as a society have managed if things years old had not been made available through 2nd hand sales, for example, or through wills or auctions? as for the bull shit statement that the likes of 'garage sales' wont be affected, that's exactly what it is-bull shit! as soon as anyone that sells something can see more $ for the same item, they will be demanding extra, additional payments or threatening to sue!

Re:

Kagan scared me a bit

Her last question to Rosenkranz made me think that she either wasn't listening, or had no idea what first-sale even meant. Her comment of how copyright is really a bundle of individual national rights made her sound overly concerned about breaking market segmentation. Maybe it was a good thing she recused herself in the Omega case.

Re: Kagan scared me a bit

I don't understand your concern. She asked if when someone buys the Chinese rights they are also in effect buying the U.S. rights since they can just turn around and import the items. Rosenkranz's answer didn't really address the question. But the fact is that the Chinese manufacturer could create the items, sell them to a subsidiary so that first sale kicks in, and then import them into the U.S. under Kirtsaeng's reading.

Re: Re: Kagan scared me a bit

I was always under the impression that the US first sale doctrine only applied when goods were sold to the end user not to any other part of the distribution chain since they are still considered 'new'.

If this is not the case then maybe specifying that it ONLY applies to end users and specifying what "end users' (and it can mean both commercial and non commercial user.. but MUST be a user of the goods) and therefore the ability to resell goods under first sale can only then apply to the end user gifting/selling the goods onwards. This would not preclude a commercial entity like Kirtsaeng purchasing the goods from end users and then reselling them into the USA but would stop manufacturers/distributors selling to third parties (Kirtsaeng) directly without the goods actually being used in first place.

Re: Kagan scared me a bit

Magic Words

Wiley forgot to wrap the books in a plastic seal declaring they keep title but grant a limited use license to the contents, an incantation which works fine for anything in sight of a computer. There the parade of horribles is established precedent. First Sale need not apply.

Re:

What? What's not to get? Bear in a mouse hole. Makes perfect sense to me, especially when dealing with horribles. It's just like when you detune the crab pots and there are 50 foot bishops in there and then you make the water black with a dowsing rod and, whoop, there goes Wall Street down to the banana patch. Perfectly straightforward.

Re: Re:

What? What's not to get? Bear in a mouse hole. Makes perfect sense to me, especially when dealing with horribles. It's just like when you detune the crab pots and there are 50 foot bishops in there and then you make the water black with a dowsing rod and, whoop, there goes Wall Street down to the banana patch. Perfectly straightforward.

Re:

copyrighted sound systems? Huh??

"Imagine Toyota, all right? Millions sold in the United States. They have copyrighted sound systems. They have copyrighted GPS systems."

Does he mean the software that runs the sound systems and GPS systems? That could be the only thing that could be copyrighted.

If we are going to go to THAT place, then essentially 100% of electronics (mp3 players, microwave ovens, cell phones, computers, alarm clocks, digital watches, Xboxes, cars, alarm systems in HOUSES, etc.) will not be able to be re-sold without agreement of the copyright holder on the firmware/BIOS/ROM or whatever.

Re: copyrighted sound systems? Huh??

Exactly ! And shortly after this Court Rules in favor of Big Corporations I might find out I can't sell the Used films and books I sell online.I have a huge Collection of only physical products.
First Sale Rights ! I buy a product I have the Right to Sell it or to Will it to my Son.
I am watching this case closely and if it is decided that Corporations are favored over people then I will just never buy a physical film, music, or book again.I will steal what I want and I will not feel guilty about it.

Re:

Fair Use as an answer?

Olson responded that each scenario has different sets of facts, and then went back to his "well, there's fair use" routine, which Chief Justice Roberts finally called him on, asking Olson to expand on what else there is besides fair use, ...

Fair Use would eventually confront the same controversy as First Sale, as it is a similar limitation placed upon the exclusive rights defined in §106 and the same legal arguments should apply.

Briefly:

§602 : Importation is an infringement of the exclusive right to distribute codified in §106

§106 : Except for the limitations specified in §107 through §122, copyright holder has the exclusive right to distribute.

The argument that §602 should recognize the exclusive rights of §106 but without its Fair Use limitation would be the same for all of the other limitations called out by §106 (which is why libraries and museums weighed in with their concern). Fair Use would not resolve the dilemma presented by Chief Justice Roberts.

Goodwill out of business?

Beyond what anybody has brought up here, seems to me that a ruling in favor of Wiley would put Goodwill, St. Vinnie's, and every donated goods reseller out of business. They'd be forced to verify copyright before reselling every single item they donated, because any mistake would make them liable.

Pawn shops, same thing. Craigslist and ebay in general, same thing.

The forest for the trees here is not the inability to resell imported copyrighted goods - it's the cost of protecting yourself against liability for accidentally doing so. It effectively ends resale of ANY kind.

Fair Use

Translation: A permit to extort money, and use threats and actual lawsuits to block what the copyright holders do not like. This includes using lawsuits to force a business into bankruptcy when the copyright holders do not like it despite it being based on fair use.

Re: copyright is the right to control COPYING

Copyright is not *properly* about the copies, it is about the COPYING.
Wiley wants to make this about the copies. It jumps into the sec106 quagmire but wants sec 109 struck out on a semantic quibble concerning the words 'lawfully made under this title' (which Scotus screwed up dealing with Omega v Costco inho).

Wiley wants 'lawfully made' to modify 'under this title', so that something not made in the USA with the consent of the US copyright owner is 'not lawfully made under this title'.
I have not seen any mention of the Berne Convention. But that Convention effectively means that *any* copyrighted work, produced by a national of a Convention country and subject to copyright in his country, is granted copyright protection in all other Convention countries.
I presume that Wiley published first in the US, and possibly in other places within 30 days of the US publication.
So Wiley's publication of the book in Thailand, is with Wiley's consent. That consent pursuant to the Berne Convention is good worldwide: the Convention countries agreed to accept and uphold minimum mutual standards.
Thus those books were 'lawfully made under this title': they were made with the consent of the copyright owner.
Wiley is trying to say that the copyright it (or its subsidiary) holds is a different copyright, but it has to argue that it is for the same book (otherwise there would be no question: 2 different books/copyrights, Wiley cannot object).

I am surprised that the effect of the Berne Convention was not mentioned, since that Convention, which expands the extent of a US copyright's 'aura' also extends the owners' consent when view in this manner.

No more US manufacturing

It seems to me that a ruling in favor of Wiley would be the final nail in the coffin to any manufacturing in the US. In such a scenario, absolutely everything sold here will be manufactured overseas just so the manufacturer/rightsholder can control/ban the resale market.

Re:

Keep in mind that the others get to hear the remarks by this minority. With them showing significant understanding of the effects of this ruling the others may not have realized, they can still be persuaded that the minority is right, and ruling for Wiley is bad.

Sadly, I can see this decision possibly destroying what's left of the economy, if they rule in favor of Wiley. Every one will start moving all their business overseas, along with all the jobs it entails.

common sense

The wording of the statute is "Made under this Act". Back in the day there was no copyright unless it was registered prior to publication. That was abolished so that copyright applies automatically UPON publication. If that is the case then ANY work that is "published" in the US is in fact protected under "this Act".

I really see an easy way out of this for the Court. They simply adopt the above and eliminate the issue completely. Since the copyright protection exists, so does the First Sale Doctrine.

More Refined Common Sense?

Having read my comment, I wanted to expand upon the argument:

Section 109 states: “Notwithstanding the provisions of section 106 (3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to…”

The wording of the statute is "lawfully made under this title". There are 2 arguments I can see:

1. A copy made outside of the US is “lawfully made under this title” if
a. the original copyright existed in the US and the copy was lawfully made. The location of the duplication is unimportant to the analysis here because the Act merely reserves exclusive rights to the holder of the copyright. The fact that the US copyright holder consented to the duplication makes the copy lawful. The fact that the license was granted by the US copyright holder means it was lawfully made “under this title”;
b. there was no original copyright when the copy was made. It would seem in this case there was no way that the duplication could have been “unlawful”. Since the Act merely proscribes acts in connection with US copyrights, the duplication was in fact “lawful under this title”.

2. Although a weaker argument IMO, history also supports the 1st sale in such cases. Back in the day there was no copyright unless it was registered prior to publication. That was abolished so that copyright applies automatically UPON publication. If that is the case then ANY work that is "published" in the US is in fact protected under "this Act" as of the date of publication. If the duplication was made lawfully – under any of the 2 examples above – then it seems that it was “lawful under this title”.

I really see an easy way out of this for the Court. They simply adopt the above and eliminate the issue completely. Since the copyright protection exists, so does the First Sale Doctrine.

Re: More Refined Common Sense?

The textbooks at issue were not technically "published in the United States". (In reality, effectively identical books were published in the US, but not *these* books.) They were published abroad and then imported after first sale. The theory advanced by Wiley seems to be that this takes them out of 109, leaving only section 602 applying.

Spanking!

If that snippet of argument transcript is any indication, Olsen took a spanking.

Back upthread, commenter aliasundercover was onto something. If I had to try to make Wiley's argument, I'd try my best to separate content from object. Copyright law extends certain protections to digital content, especially content that's not delivered via physical media like a CD or DVD.

That might not be any more successful than Olsen's attempt anyway. Thankfully, I don't have Olsen's job.

Re: Spanking!

So under that argument, it would be legal to resell your imported Toyota as long as all the software that runs on all its embedded computers is erased? That still effectively means that you can't resell a *functional* imported car.